Giacomo Corneo, Is Capitalism Obsolete? A Journey through Alternative Economic SystemsTranslated from the German by Daniel SteuerHarvard University Press, 312 pp., $29.95

THE PAST DECADES have not been kind to the average individual living in an advanced capitalist economy. Even if she survived the Great Recession unscathed, her prospects are bleak. She has heard only recently of the infamous 1%, but her distance from the wealthiest in society has been increasing at least since the mid-eighties—a trend that doesn’t show signs of reversal. And her children might have bleaker prospects still: beyond income inequality and unreliable employment, they will also have to reckon with the uncertain future of the global environment and of welfare and pension systems, to name just two sources of instability. Against such an outlook, the faith of the average individual in democratic institutions is wavering. She is more disillusioned with politics and participates less. And when she does participate, her vote is more likely to be captured by political entrepreneurs, populists, and resurgent nationalists, who capitalize on her discontent but offer few practical solutions and, instead, worsen the situation altogether.

For these and many other reasons, she’s unhappy. And she is not alone. In fact, many are unhappy, and increasingly so, with the system, the establishment, the political and economic model on which Western societies have converged. Yet, for all of our system’s unpopularity, no specter haunts the West. Since the fall of the Berlin Wall and the end of the disastrous Soviet experience, no true and coherent alternative has emerged to challenge—intellectually or politically—the capitalist market society. After all, 1989 supposedly marked the end of history and the triumph of Capitalism as the only sustainable path to societal progress.

Looking at the picture we painted above, we might then feel more generous towards today’s society, despite its many flaws. Indeed, borrowing from one of its most strenuous and illustrious defenders: ours is the worst system possible, aside from all the others. Churchill of course had in mind democracy, but he may as well have been speaking of the capitalist market economy. But while he may uphold such a brash claim with his name alone, we are bound to show a certain due diligence: we must first scrutinize all potential alternative systems. Is there really nothing better out there?

This is precisely the starting point for Giacomo Corneo’s book Is Capitalism Obsolete? The title might have well been Are there viable alternatives to today’s Western socio-economic system?—though it isn’t hard to understand why the editors at Harvard University Press went for the catchier title. Corneo’s intent is to respond to the “longing for a more humane, more just, and more efficient economic system”—a longing that is felt across the map in Western societies. To this end, Is Capitalism Obsolete? puts forward an “unprejudiced and rational discussion about the best available alternatives to the present system.” The result is an engaging volume that is well-balanced, often thought-provoking, and always accessible. More importantly, Corneo’s effort breathes new life into a conversation that is vital to the well-functioning of our democracy and to the sustainability of our economic system.

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Corneo is an Italian economist living in Germany. He is chair of the Department of Public Economics at the Freie Universität of Berlin. This puts the book into a certain perspective for at least a couple of relevant reasons. First, there are the cultural reference points: when considering the allocation of resources across production lines, divided into fundamental goods and luxury goods, Corneo lists pasta as the natural example of the former. Second, Corneo’s standard model of capitalism is of a distinctly European lilt: the economy he puts forward in his final chapter is that of the continental welfare-state—the “social market economy—arguably the most successful version of capitalism.”

Beyond its discussions of political economies, though, Is Capitalism Obsolete? is also about something else: parenting strategies. Corneo chooses to introduce his investigation not with a soliloquy, but with a dialogue. Specifically, he reports an email exchange with his daughter, whose persistent questioning ostensibly motivated him to embark on the journey that is this book. In the emails, the daughter plays the young and restless revolutionary who harshly criticizes the capitalist system and invokes its downfall. (No information is provided as to whether the emails were sent from private or work accounts.) Be it strategic parenting or déformation professionnelle, Corneo doesn’t downplay his daughter’s concerns. Hence the 300-page, hardcover response—we’ll see whether she’ll question Dad’s field again. More importantly, the father-daughter vignette provides an alternative motivating spirit to the work, making it more approachable and humanizing what is otherwise a fairly rigorous and systematic treatment of long-standing academic debates. Furthermore, the generational back-and-forth highlights who might be the audience for such a work. On the one side, the older generations who, groomed in the current system, have enjoyed its early golden days and suffered its recent pitfalls from a more consolidated position. On the other side, the infamous millennials who came of age during this time of crisis and permanent austerity, who may be more open to—and eager for—systemic overhaul.

We cannot tell how much of the conversation belongs to the world of fiction, but the choice of framing is itself important. Beyond humanizing the discussion and expanding the audience for such a debate, the intergenerational dialogue is refreshing. And, importantly, it doesn’t become a patronizing lecture. To be sure, the economics professor, who is more knowledgeable by virtue of age and profession, takes the lion’s share of the book. But his restless daughter is no idle listener. She questions her father relentlessly, irritates him, doesn’t miss an opportunity to call him out for his biases (“ever heard of domination-free discourse?!” she teases him at one point). This is the kind of intergenerational conversation that Corneo puts forward as the correct way to think about societal reform: fathers and daughters sitting at the same table, conversing openly and frankly about the world they’d like to create.

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Between the two father-daughter dialogues, which stand as prologue and epilogue of the book, Corneo changes tone and style. In ten chapters, he takes the reader on a tour of the main societal and economic models that could be considered alternatives to the capitalist market system. The journey starts with the Republic of Plato and continues all the way to the modern discourse on universal basic income. In between, Corneo considers visions as diverse as the fictitious island of Utopia, devised by the 16th-century English philosopher Thomas More, and the self-managed firm systems of the grassroots economists in the 1970s. But it is important to emphasize that Is Capitalism Obsolete? is not an intellectual history: it does not survey ideas, their formation, and their evolution over time. Rather, Corneo simply takes what he considers to be the main systems of political economy and analyzes them for their theoretical structure, only briefly recalling their intellectual origin and sometimes reminding us of their implementation—if it did ever take place.

The whole exercise is structured and pragmatic—just as we might expect from an economist. Indeed, Corneo’s dialectical approach will appear familiar to any reader who took Econ 101: You have an idea of a rule on which to base society? Okay, let us analyze that rule. But first, let’s forget about society: take two individuals and two goods. But Corneo’s explanations are neither pedantic nor simplistic. He evaluates each system using theoretical deductive reasoning. He first presents the elements of the relevant model analytically: how it would work in theory and why it might be preferable. Then he teases out the incentive-structures that such a model would create for the actors involved (individuals, firms, and institutions) and imagines how the system would work in practice. Once the theory and the imagined practice are in place, Corneo’s criteria for the final evaluation are threefold. First, whether the system would invite people to participate and exert the effort that is involved in any productive action. Second, whether the system would allocate the limited resources of society efficiently across different economic activities. Finally, and importantly, what kind of humanity this system would bring out in individuals.

The first two criteria of evaluation are straightforward: they cover the mechanical functioning of any sustainable system. But straightforward does not mean simple. To properly appraise the practical workings of a system as complex as a whole economy is a herculean task, especially if one is equipped only with thought experiments. Nonetheless, the third criterion—What kind of individuals does capitalism produce and what would another system produce?—is trickier still. How can we hope to foresee and understand the psychological impacts of this or that kind of economic interaction, or, even more difficult, begin to measure those impacts? Beyond the problem of guessing the psychological dynamic correctly (a question for social psychologists), the debate is open as to which moral compass we ought to follow in an ocean of viable alternatives (a question for social philosophers). In other words, Corneo is asking a normative question here, too: what kind of individuals, what kind of humanity should a societal system produce? This third line of investigation is the most epistemologically complex that Corneo takes on. It is understandable, then, that he concentrates his efforts on the first two criteria, spending ink on the third one only when it seems to be most pressing, or the alternative model most promising. And yet the notion of a “criterion of humanity” stands as a contribution in and of itself.

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Given its structure, Corneo’s book faces one chief problem: the risk of sounding repetitive. It presents a number of societal models, one after another, and tries to analyze them in a structured manner. Yet Corneo is able to circumvent the problem by using each chapter to introduce new concepts and to add new dimensions to the problem of how to design a society. So, the reader has the impression of moving forward towards a final destination, rather than circling around the same problem over and over. As the author posits in the preface, “a trip into the unknown is a trip within oneself.” Indeed, what Corneo’s exercise gradually reveals, through the analysis of alternative models, is the structure and functioning of the capitalist system itself. At each turn, the alternative proposal changes one feature of today’s world—first the democratic institutions, then private property, then the ownership structure, and so on. With each increasingly specific and technical change, we understand a bit more of our own society: how it works and why it works (or doesn’t).

Yet one might still take issue with Corneo’s approach. As the book reviews different alternatives, and one after the other shows how they do not live up to the criteria of evaluation, it inevitably gives the impression that the capitalist system represents the pinnacle of societal progress—the end to which all roads lead. The incremental method hides a teleological bent. But Corneo’s daughter is quick to catch this rhetorical device. She criticizes her father: “Here you are, at the end of our trip, comfortably settled between two certainties. First, you’re certain now that there’s no clearly superior alternative to capitalism. Second, you’re certain that our best bet is a strategy that breathes new life into social democratic reforms with some basic democratic principles and some new help from the Internet.” It is worth pausing to evaluate this healthy “wait-a-second” moment that the daughter provokes, one that Corneo accepts as a legitimate challenge to his own conclusions.

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Let us return, then, to the starting point of the book (and of this review): discontent and worsening economic conditions. How do we properly assess the economic conditions that capitalism has created? Is discontent a just measure of the performance of a system? Is dissatisfaction a socio-economic product or a permanent human condition? After all, an individual born in the twenty-first century in any Western industrialized country will most likely be better off than her grandparents. Even more so if we dig deeper into the past. Take technology. In most households, even in the poorer segments of society, families own a fridge, a phone and, many times, a smartphone. It is undeniable that, in Western society, achievements such as these have lifted the living standards for all. And if we can doubt the worth of owning yet another fancy gadget, it may be more difficult to do so with vaccines, or ever-cheaper and ever-faster transportation around the world. What is even more astonishing is that, under the capitalist political economy, Western society has achieved all of these heights of production—medical, technological, artistic, or otherwise—with a simple rule: if you don’t work, you don’t eat. This underlying law is intuitive, natural, and self-sustaining. The private market is quintessentially simple. Yet, for all of its simplicity, it achieves what many systems fail to do: it encourages participation by all, it prompts innovation, it facilitates the scaling up of production.

This picture clearly reeks of over-optimism and naivety. To begin with, the capitalist market logic may seem straightforward. If left alone, though, it overheats, degenerates, and collapses. Moreover, its historical development is tainted by the exploitation of colonies by imperialist Western nations. It is not clear that Western society would have achieved the same wealth without the bloody appropriation of resources from other countries. Finally, we ought also to question the “naturalness” of the capitalist-consumerist logic. Is man a natural consumer? Is life truly made better by “things”? This may be more arduous to judge with advances such as vaccines than with the wondrous but perhaps unnecessary world of Hollywood or with the ever-updating world of tech, but the point stands. The overarching doubt is whether capitalism has influenced us to the point of making it all feel seamless: this is how things work, or better yet, this is how things are supposed to work. The latter lines of criticism exceed the capacity of Corneo’s book, speaking to the moral philosophy of reparation and the social psychology of consumerism. The first concern, about the potential implosion of the market, exposes the hidden heart of our discussion on alternative models: the political economy of our own capitalistic model of society.

In order to correct the many failures of the market, governments rely on the two powerful tools of regulation and welfare. Indeed, every sovereign and democratically-elected government has the power to restrict harmful productions and to redistribute wealth in society. In practice, of course, things are not this simple. In the global economy, capital can easily escape the efforts of a single, zealous government. At the same time, cross-national coordination is difficult to achieve and maintain because of diverging interests and competition between countries. Similarly, redistribution requires strong political action. Research on the political economy of welfare has long demonstrated that greater inequality does not automatically lead to greater demand for redistribution, as might seem plausible and desirable. The past year in the U.S. should offer a sufficient example. Notwithstanding the lackluster levels of poverty and economic inequality of the United States, the new administration has cut taxes and social policy. What might be even more surprising is that a part of the population which benefits the most from social policy voted the current president into office and forms his party’s core. Why is this the case? A number of reasons. Voters often do not realize what is best for them—a mindset dubbed “rational ignorance.” There are multiple issues in the policy space and one pressing topic might overshadow another—terrorism, say, can bring about a strong law-and-order rhetoric that leaves welfare in the background. And finally, strong interest groups have no shortage of tools to sway government action—through public-influence campaigns, lobbying, and party financing.

As a result, the capitalist market and the welfare and regulatory state coexist in perennial tension. The state tries to control the market and limit its expansion, while the market tries to influence the state and escape its intervention. Is there no way out of this unbalance? Corneo leaves one response to his daughter. The socialist shareholder model seems to work, at least in theory, so why not go with it? The economist is not convinced: “Steady on. You cannot simply pick an economic system off the shelf like a product in the supermarket.” Indeed, societal transition poses countless problems. How to prompt such a grandiose change? How to mobilize sufficient political capital? How to be sure of the results of the endeavor, which will also likely entail substantial risks? In the epilogue, father and daughter agree on a potential path to systemic overhaul and then, in Italian fashion, call it a day to go have coffee. Corneo leaves the details of this reform proposal for the appendix, adapted from one of his recently-published academic papers.

This conclusion seems to leave us between the proverbial rock and hard place. On the one hand, the unforeseeable prospect of top-down systemic revolution. (We remember what happened the last time a nation followed the advice of two German economists.) The alternative, of course, is to maintain and endure the apparent unbalance of the current state of affairs. This could seem dissatisfying. In the current system, as we saw earlier, inequality has been on the rise. Against this trend, the only arrow in our quiver would be careful reform, a painstaking recalibration of the balance between market forces and government intervention. Reform should target the influence of market forces in politics, restrict the flux of private funds into politics, and reinforce the democratic institutions that ensure proper representation. In turn, regulation should correct market failures and redistribution through welfare should compensate for the inequality created by said failures.

This process is frustrating because it is a slow, trial-and-error game, moving two steps forward, two steps back at every turn. It is also technical and tedious and, frankly, just not sexy. It is a weak response to the many movements that, through the years, have expressed the longing for justice and equality so widespread in today’s society. Similarly, in the intergenerational dialogue between the economist Corneo and the reckless young revolutionary daughter, it sounds like a paternalistic “be patient” that shuts downs all possibilities of real dialogue. Yet perhaps this framework grants a role to more restless millennials and their hopes for more radical reform, and a strong one at that. Lukewarm policy implementation need not entail lukewarm policy debate, and even less so lukewarm political discourse. For countless structural reasons, the legislative and executive processes in today’s state function much like a funnel: you need a lot of input to achieve the slightest amount of policy output. In this sense, a strong and constant political discussion is the very fuel that powers the governmental machine and keeps it in balance with the forces of the capitalist market.

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At the end of the journey that is this book, the reader sits quietly, as if in the middle of an art gallery, after having thanked the chaperone. Around her, paintings of all different potential societies. If the value of a visit is measured by the number of times that the invitee pauses to reflect on an interesting perspective or a novel notion, then Corneo makes a good guide. Better yet, as great guides do, the author often anticipates the doubts of the reader and addresses them in the following paragraph. He even brings up many that he himself had not thought of, destabilizing the supposed certainties that he (Corneo) posited shortly beforehand. As in all visits to an art gallery, the interpretation that Corneo offers is but one and brings out certain features while disregarding others. However, beyond the small, inevitable degree of subjectivity and inbuilt bias, Is Capitalism Obsolete? achieves in full its most ambitious and important goal: to keep the conversation going. In the current times of high political and economic uncertainty, when Western society faces many formidable challenges that call into question its very core tenets, we should all reflect more and more methodically about how our system works, why it works, and how it could be improved, reformed, or, if need be, revolutionized.